Question
3. Americo's Earnings and Global Taxation. Americo is a U.S.-based multinational manufacturing firm with wholly-owned subsidiaries in Brazil, Germany, and China, in addition to domestic
3. Americo's Earnings and Global Taxation. Americo is a U.S.-based multinational manufacturing firm with wholly-owned subsidiaries in Brazil, Germany, and China, in addition to domestic operations in the United States. Americo is traded on the NASDAQ. Americo currently has
641,000
shares outstanding. The basic operating characteristics of the various business units are as follows:(Click on
the
icon to import the table into a spreadsheet.)
Business Performance (000s) | U.S. Parent (US$) | Brazilian Subsidiary (R$) | German Subsidiary () | Chinese Subsidiary () |
|
Earnings before taxes (EBT) | $4,480 | R$6,190 | 4,420 | 2,530 | |
Corporate income tax rate | 35% | 25% | 40% | 30% | |
Average exchange rate for the period | R$1.8696/$ | 0.6043/$ | 7.7049/$ |
Americo must pay corporate income tax in each country in which it currently has operations.
a. After deducting taxes in each country, what are Americo's consolidated earnings and consolidated earnings per share in U.S. dollars?
All MNEs attempt to minimize their global tax liabilities. Answer the following questions regarding Americo's global tax liabilities:
b. What is the total
amountin
U.S.
dollarsthat
Americo is paying across its global business in corporate income taxes?
c. What is Americo's effective tax rate (total taxes paid as a proportion of pre-tax profit)?
d. What would be the impact on Americo's EPS and global effective tax rate if Germany instituted a corporate tax reduction to
28%,
and Americo's earnings before tax in Germany rose to
4,960,000?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started